Growth, the Winnipeg Way

by Jodi Richards On Aug 4, 2006

Located mid-continent, this city has a rich
history as a transportation hub. Barry Rempel, president and CEO of the Winnipeg Airports Authority Inc., which oversees operations of Winnipeg International Airport, says officials plan to continue that tradition. The airport recently embarked on a redevelopment program which includes a brand new terminal building and parking structure, while furthering the authority’s vision of creating an integrated transportation facility that will bring all forms of transportation to the airport for the benefit of the
community and the province.

Rempel joined the Winnipeg Airports Authority as president and CEO in April 2002. Prior to that, he worked for a property development subsidiary of the Calgary Airport Authority, and held positions with Canadian Airlines International.
The Winnipeg Airports Authority Inc. assumed operating control of the Winnipeg International Airport in January 1997. Led by a 15-member board of directors, 11 of which are nominated by seven different public and private sector agencies, and four of which are nominated by the Board, the authority is a non-share capital corporation, which Rempel says follows the Toronto Stock Exchange guidelines and principles for accountability. “So although we’re not publicly traded, we treat ourselves as if we were for accountability transparencies,” he says.

There is a clear delineation between board and management responsibilities, says Rempel. The Board has three standing committees: governance, audit, and AIRplan (responsible for providing guidance on the Airport Infrastructure Redevelopment Plan). And, a community consultative committee, made up of airport users, including general travelers, airport stakeholders, Chamber of Commerce representatives, and others, acts as a sounding board to the broader community, Rempel explains.

The vision statement for the authority is, “To lead transportation innovation and growth.” Rempel is quick to point out that it doesn’t limit itself to air transportation. “And that goes back to the history of this community,” he says. “It’s always been about transportation, whether you go back to the original days as a settlement or even when it was an aboriginal community.” Winnipeg’s central location (some 24 km from the geographic center of North America) on the Red River made it the place for trade. When the railway came to Canada, nothing moved into the country without first going through Winnipeg. “In fact,” says Rempel, “in those days, they called it Chicago North, because it was the same idea — all the rail was coming through Winnipeg.”

In the 1960s, when the trans-Canada highway was completed, trucking companies in Winnipeg “revolutionized” the way distribution in Canada worked, Rempel says. “What we’re hoping to do — and are going to do — is to bring all modes of transportation together for the benefit of the community.”

A Steady Economic Base

Winnipeg is a community of some 700,000 residents. According to Rempel, it is a part of the country that “has been a bit forgotten about through the ‘80s and ‘90s, but is now just really starting to come into its own.” The community is growing, as is the demand at the airport. In 2005, the airport handled some 3.2 million total passengers, a 6.6 percent increase over 2004. Some 12 percent of the airport’s traffic is connection, 88 percent is origination and destination.

In 2004, Winnipeg International was responsible for 21,000 jobs in the province, and $2.6 billion in economic activity for the region.

Rempel adds that the Winnipeg economy is relatively strong and is not one prone to great growth spurts or great depression. “It is the most diverse economy of any of the Canadian provinces,” says Rempel. “We always said that Manitoba grew at 3 percent. It didn’t matter what was going on in the rest of the world, Manitoba grew at 3 percent, and that’s because of the diverse economy. There’s not one major industry here that’s more than 6 percent of the economy.”

And it’s that steady, diverse economy that Rempel partially credits for the airport’s strong performance following 9/11. Unlike many other communities, Winnipeg did not see a dramatic dip in passenger traffic in 2002 and cargo was unaffected. In fact, within a year, the airport was back up over 2001 passenger levels.

Airport Redevelopment

The official groundbreaking for the airport redevelopment program was in September 2005. Roadwork is currently underway, along with the construction of a four-level, 1,600-stall parking garage that will also house the car rental facilities, on track to be completed this fall.

Rempel says the parking garage is just one of the aspects of the redevelopment that was designed around customer requests. “The customers told us they wanted to be within 1,000 meters of the terminal — that would be the maximum walking distance that they’d ever want to see here. Well, the only way that we could do that is to bring as much of the parking right next to the terminal as we possibly could.” Virtually all of Winnipeg’s parking to date has been surface lots.

The airport spent a good deal of time consulting with the community and airport tenants during the planning process, and Rempel says the planning probably took a little longer than it might have because of all the consultations. However, it is that open communication that he credits for the support the airport has received for the project from the community and the air carriers that serve Winnipeg. “The community has absolutely adopted the project,” he says. “I think, in part, because it’s an indicator to them. It’s an outward manifestation of what people know is happening in the greater community.”

The airport estimates that its redevelopment project will result in a $1 billion economic impact and create some 7,600 jobs.
Constructed in 1962, the terminal is definitely showing its age, says Rempel. The cost of refurbishing and the inconvenience it would have created for the traveling public as well as the operators here was too much, so the Authority decided to construct an entirely new facility northeast of the existing terminal.

The project is expected to cost some $560 million, which includes the parking garage, terminal, roadways, civil work sites, and infrastructure. It is funded through Winnipeg’s Airport Improvement Fee, which, according to the 2005 Annual Report, was at $15 per local boarded passenger, $10 of which, together with its investment income earned, is restricted for airport site redevelopment.
At roughly 53,000-square meters, the new terminal building is a very open and transparent facility, which is exactly what the community asked for, says Rempel. “They felt it was [reflective of] Winnipeg’s personality — open, transparent, and you can see the horizon from everywhere.” He adds that the design makes the terminal very intuitive. “If somebody walks in, they go up to a kiosk to check in and they can already see that their aircraft is there.”

The new terminal will utilize common use technology. Explains Rempel, “To me that’s just a standard now — you don’t have an option. We will have control of the technology right from the property line.” Early on, says Rempel, the airlines were against the idea. But, they’ve seen it done at many other airports and Rempel says they now see that common use does reduce costs and manpower requirements.

Winnipeg’s carriers have expressed to Rempel that by 2009 when the terminal opens, 80 percent of travelers will have checked in either on a PDA (personal digital assistant) or from a home computer. “That means a very different process,” he says. “The days of the grand check-in hall, they’re gone. This (new terminal) doesn’t have a grand check-in hall.” Rempel adds that it was originally thought the airport terminal would be much larger, but upon further review and working with the carriers, “we’ve been able to determine that we don’t need it. Technology will take care of a lot of what we used to think was required.”

A Leed-Compliant Terminal

Following a growing trend in construction and design, the terminal is registered as a LEED (leadership in energy, efficiency and design) project. Throughout the construction process, the project will be monitored closely to ensure it is adhering to the standards established by the Canada Green Building Council. “It’s one of those things that I thought would be a good idea, but I have to tell you, the financial responsibility side in me was always wondering, does it really pay?

“What we’re finding is it’s really about good management and it does have a positive impact — particularly on operating costs. One of the things carriers are always asking us is to keep our operating costs down. Well, LEED is actually helping us do that, and the process is one that allows us to track all of that and be able to prove it.”

Some of the environmental-friendly aspects which the airport is incorporating into the design and construction of the terminal include:

SoFame, a waste heat recuperator system, that captures heat from the airport’s utility building and is then used to heat water;

The openness of the facility and glass walls provide natural light to the terminal;

Electrical demand management throughout the terminal (e.g., escalators slowing down when not in use);

Also, one of the airport’s runways was decommissioned and the pavement will be broken up and used as fill for the construction project. “That has a net benefit of just over $500,000 to us because we’re reusing the crushed aggregate runway to be the base for a lot of things we’re doing around the terminal building,” Rempel says.

New Revenue Streams

In an effort to keep operating costs at Winnipeg International competitive, the airport authority has developed and continues to look for new revenue streams. According to Rempel, the airport has to be “a little more creative than a lot of other airports.” Airports larger than YWG have heavier aircraft that operate there, and that typically comes with higher landing and other fees.

“Because our critical aircraft is an A319,” Rempel explains, “it means we have to have a lot more landings in order to get those sorts of revenues.” In lieu of that happening, Winnipeg uses subsidiaries to find alternate streams of revenue. One of those subsidiaries here is Avion Services Corp. which provides security (both on- and off-airport), parking services, and retail. “The dividends from that subsidiary come back into the company (Winnipeg Airports Authority) to help us keep our costs to our customers lower than what they might otherwise be.”

Winnipeg Cargo

Cargo is one area the airport is focusing on for growth. In 2005, some 150 million metric tons of cargo passed through Winnipeg International, a 6 percent increase over 2004. According to Rempel, the airport is currently pacing 7.3 percent ahead of 2005, year to date. “This month (June) alone in cargo tonnage, we’re up 14.3 percent, year over year,” he says.

In 2003, the airport added a new cargo apron after talking with the cargo carriers. “It was fairly quickly evident that our infrastructure was insufficient. I call it not having the right size pipe. The pipe was actually constricting the ability of the carriers to do what they wanted to do. So, just by making sure they had the right size pipe — not too big so that we’re spending a bunch of money that nobody’s using, but just the right size — cargo immediately jumped.”

Winnipeg is the number one freighter airport in Canada, according to Rempel. Typically, he says, 65 percent or more of an airport’s cargo comes from the bellies of passenger aircraft. At YWG, 95 percent of the freight that comes through is in freighter aircraft. For comparison, in 2005, some 3,600 freighters came through Winnipeg; the next closest competitor saw only some 2,200. “I’d like to say that we’ve arrived,” adds Rempel, “but we have more work to do and a lot more opportunity in that area (cargo).”

Rempel Speaks to Rent, Airports Act

On January 1, 2006, the new rent policy for Canadian airports, expected to provide close to $8 billion in rent relief, was implemented. Barry Rempel, president and CEO, Winnipeg Airports Authority, says this is only a start to addressing the rent issue.

Rempel says the rent issue has not been solved. “What it does is puts all airports on the same formula for their rent.”
In the case of Winnipeg, rent here to the government will continue to escalate over the next few years, which Rempel attributes to “harder negotiations early on leaving Winnipeg with a more reasonable rent formula compared to other airports our size.” In 2006, Winnipeg will pay some $4 million (CAN) to the government.

Rempel says the issue that he cannot get over is why the government is collecting rent in the first place. “There’s no logic behind it; it’s a form of taxation on airport users that is not applied to any other mode of transportation. It’s something that previous governments have become hooked on in terms of their perceived need for higher taxes. And that’s all it is — a tax on airport users.

“They [the federal government] get the entire airport back, complete with all the improved facilities which have to be maintained. It’s not like we can build it today and then just let it deteriorate until the lease is up. In other words, they get all this infrastructure turned back to them at the end of the lease in A-1 shape.”

At Winnipeg, Rempel says nothing had been done to the airport for years prior to the governments devolution of airports. “In fact,” he say, “Transport Canada knew that they were going to be devolving airports here in Winnipeg for about ten years before we took over, so their whole process was, don’t spend any money.” The authority had to replace all the runways at Winnipeg when it took control. “The condition of the terminal was also in bad shape, but we had to prioritize our capital and the priority was obviously making sure we still had runways. There’s no point in having a terminal building if a plane doesn’t land.”

Because of this, Rempel argues that equitable rent, if there is to be rent at all, is not equal rent. “A [rent formula] that doesn’t recognize the condition of the facilities that were turned over is just wrong, and points again to me that it is nothing more than just a revenue grab.”

That being said, Rempel adds that he is pleased that the current government has at least seen the need to address the rent issue, even if it is in stages. The previous formula, in many ways, punished airports for bringing in more revenue. Explains Rempel, “The more revenue you brought in, the greater percentage they took. So it was a disincentive, frankly, for airports to even bring more money in because the government just took it away in the form of its rent.”

The proposed Canada Airports Act, introduced in mid-June, includes a new declaration of Canadian airports policy and sets out the roles and obligations of the Minister of Transport, Infrastructure, and Communities and the affected airport operators to which it will apply. Initially, the act will affect 28 airports; in the future, it will apply to any airport that handles more than 300,000 passengers per year for three consecutive years. [For more on the Act, see page 25.]

Comments Rempel, “I’ve often felt that [it] was actually a solution in search of a problem, as it relates to Winnipeg.” He says that much of what is contained in the Act is already what is in the bylaws of the Winnipeg Airports Authority. “So as it relates to Winnipeg, in [the government’s] attempt to ensure that all airports are addressed, they’re not focusing on what they felt the real problems were, but they’re focusing on making it look equitable.

“I applaud the government on one hand for taking a look at what the reporting requirements should be, but, again, I step back and say, what is the real issue they’re looking at? If there are issues in the leases, then let’s address the issues in the leases with the specific airports that they believe need to be addressed.”

The data reporting aspects of the Act, while already a part of Winnipeg’s operation, could have a negative impact on smaller airports, expects Rempel. “The larger the airport, the less the impact,” he says. “And that’s just because the reporting requirements are the same whether you’re a $3 million or $300 million airport. You’re going to need staff, new models to collect data, all those sorts of things. So, the smaller the airport, the greater the impact of the Act.”

Rempel adds that it’s imperative that any airports act maintain the entrepreneurial nature of what the airports have been able to accomplish so far. “I just want to ensure that whatever’s introduced does not take us back and allows us to really be the engines of the economy that we can be,” he says.

Winnipeg’s Security Flow Innovation

Within the new 53,000-square meter terminal at Winnipeg International Airport, travelers will be treated to an
innovative way of processing through security and, for
travelers to the U.S., customs pre-clearance.

According to Barry Rempel, president and CEO of the Winnipeg Airports Authority, one unique development in the new terminal building will change the way travelers are processed through security and customs pre-clearance. The majority of major Canadian airports today have pre-clearance — passengers leaving Canada to the U.S. are actually in the U.S. before departing the Canadian airport. “In our facilities today, that causes a great deal of confusion,” says Rempel. Customers must enter the correct security checkpoint, for either domestic or transborder and existing facilities just weren’t designed for that kind of flow — the number of passengers and retail opportunities beyond security. Additionally, the two separate security checkpoints at Winnipeg require separate equipment and staff.

Working closely with Transport Canada, the new terminal will be the first to have an approved single security checkpoint. “So the customer no longer makes a decision,” says Rempel. “When they’re ready to board the flight, they’ll go through customs — a different process. But in the interim, they will already be behind security.” Not only does it save the traveler confusion, but airport retail revenue for post-security concessions is expected to increase and provide better use of security equipment and staff.